how to ladder-up withdrawls?

[MN_1021]

I am planning for a ER in early fifties. I am 42 and wife is 41.

If you had following pots of saving on the day of ER (say at age 55); then how would your stack up your withdrawals.

457B (NDQC) – 400K- No withdrawal restrictions
Cash from the sale of house (will move to our rental house which is smaller & both houses paid)- 500K and can use this money for whatever we want to
Retirement accounts (IRA's)- 1.5M
Pension at 65: 3500 (COLA included)
SS (wife and I) at 65: 2500 Husband and 1200 Wife

Kids college will be fully paid through a separate 529; so not included in the numbers above.

 

[nun]

I am planning for a ER in early fifties. I am 42 and wife is 41.

If you had following pots of saving on the day of ER (say at age 55); then how would your stack up your withdrawals.

457B (NDQC) – 400K- No withdrawal restrictions
Cash from the sale of house (will move to our rental house which is smaller & both houses paid)- 500K and can use this money for whatever we want to
Retirement accounts (IRA's)- 1.5M
Pension at 65: 3500 (COLA included)
SS (wife and I) at 65: 2500 Husband and 1200 Wife

Kids college will be fully paid through a separate 529; so not included in the numbers above.

I would not sell the house. I would rent it out to give you some diversified income. Take withdrawals from 457 to cover any shortfall until age 59.5.

Do you have any after tax or ROTH accounts?

 

[DrRoy]

I would not sell the house. I would rent it out to give you some diversified income. Take withdrawals from 457 to cover any shortfall until age 59.5.

+1 Renting the house is interesting if you are willing to be a landlord. It is good for diversification.

 

[pb4uski]

I would utilize the taxable accounts ($500k) first and do low-cost Roth conversions to the top of the 15% tax bracket, paying any taxes due from the taxable account.... next would be the IRAs or 457(b).

If the 457(b) had a good stable value fund then I would keep it and use that for part of my fixed income allocation, otherwise I would roll it over into the IRAs for simplicity.

I retired at 56 and that is what am doing.

 

[Hyperborea]

I would not sell the house. I would rent it out to give you some diversified income.

Doing that would remove the tax free nature of the capital gains on the house. If they really want a rental house then sell the current house and buy something else as a rental.

 

[MN_1021]

Thanks for all the wonderful thoughts and idea. Our annual expenes budget is about 80K including healthcare. Here is what were thinking:

- We wouldn't have too much Capital gains on the sale of the house and will need to downsize when kids are out of house. Our current rental house is where we lived in 3 years back. It is perfect size for us when the kids will be gone. So, we will move back to that house for sure. Atleast that's the plan or shall I say wife wants it and I am not going to fight it...

- I was thinking of using the 457B withdrawls and 500K from the sale of the house from age 55 through 65 when Pension and SSN kicks in. This way it will also leave the retirement accounts "alone" and let them grow for 10 years (hopefully).

- Not that we want our parents to dies; an inheritance of anywhere in between 200k to 500K will also happen sometime in our fifties (I am 42 & wife is 41)

 

[nun]

Doing that would remove the tax free nature of the capital gains on the house. If they really want a rental house then sell the current house and buy something else as a rental.

Yeah, that's always the issue with a rental.....no tax free capital gains when you sell, but you get the depreciation and deductions instead. My rental grosses $19.2k a year, but I only declare $10k for income tax.

I like the idea of selling the current house and using say half of the proceeds to buy another rental.